Senate Commerce Report Says Data Brokers ‘Operate Behind a Veil of Secrecy’ [Updated]

Report based on a year-long investigation into 9 companies

Today was Jerry Cerasale's last day as the head lobbyist for the Direct Marketing Association. It may also have been one of his least enjoyable.

Cerasale, along with Experian's svp of government policy Tony Hadley, was on the hot seat Wednesday defending data broker privacy practices before the Senate commerce committee and quantifying the industry's $156 billion contribution to the economy.

While the hearing was meant to be an overview about what data brokers have on consumers and how they use it, the chairman of the committee, Jay Rockefeller (D-W.Va.), also released a critical 36-page report based on a year-long investigation into the collection, use, and sale of consumer data for marketing purposes.

Rockefeller has never believed that self-regulation by the DMA or any other industry is enough to protect consumers' privacy. He is expected to give the industry, which is virtually invisible to consumers, a bad report card for failing to make their practices transparent or giving consumers options to access, correct, or delete the information collected about them.

The report didn't make any legislative recommendations, although staffers said Rockefeller is likely to draft legislation. It's certainly an issue Rockefeller isn't going to let go in his last year in the Senate before he retires.

"We need to probe deeply and then we need to do something about [data broker] practices," said Rockefeller. "We'll continue on this track. It's the dark underside of American life."

Based on information from nine companies, the committee drew four conclusions. First, that data brokers collect a huge volume of detailed information about consumers, from the type of car they drive, what ailments they may have, what pets they own, or what shampoo they buy. Data brokers also identify financially vulnerable consumers when they categorize consumers with assignations like "rural and barely making it" or "credit crunched: city families." Third, data brokers offer products to marketers that combine online and offline data. Finally, the report concludes "data brokers operate behind a veil of secrecy."

Rockefeller scolded the industry during the hearing, especially the way data brokers segment consumers so that they can be targeted by marketers. "I can't prove it's wrong, but there's something lethal about it. Consumers are stigmatized and then the deck is stacked against them and people are making money off it."

The report's findings were based on queries to Acxiom, Experian, Epsilon, Datalogix, Equifax, Rapleaf, LexisNexis, Spokeo and TransUnion. Although thousands of pages were turned over to the committee, the committee was disappointed that large data brokers Acxiom, Experian, and Epsilon refused to reveal specific data sources. Experian, which found itself in the middle of an identity theft ring when a subsidiary sold data to a Vietnamese company, also refused to provide the committee with its data purchasers.

Rockefeller isn't the only lawmaker or policymaker probing the data broker industry and calling for some sort of overarching law or solution to bringing transparency to the data broker industry and giving consumers more control over their data. The Federal Trade Commission is expected to release its report early next year. Sen. Ed Markey (D-Mass.), also conducted a probe, launched when he was in the House. At the request of Rockefeller, the General Accounting Office released a report last month, concluding that there ought to be a comprehensive law governing the collection, use and sale of personal information by companies. 

DMA's Cerasale tried to and convince lawmakers that new laws are not needed and could, in fact, chill the $156 billion contribution to the economy. The DMA's guidelines for ethical business practices already address the policymakers' concerns, but the organization is working with its members on improving transparency.

Acxiom, one of the world's largest data brokers, recently launched a portal that shows consumers the data the company has about them and lets them make changes or opt out. 

Cerasale also questioned the suggestion, made by the FTC and other policymakers that the industry participate in a centralized web-based portal. "At first look, it sounds like a great idea. But it requires you to authenticate who is coming in and that will require more data and more accurate data," he said.